Cigarette Prices to Rise from February 2026 After New Excise Duty Regime

New Tax Regime Pushes Up Cigarette Prices

Cigarette prices across India are set to increase sharply from February 2026 following the rollout of a new excise duty and cess framework on tobacco products. The change marks the first tax hike on cigarettes in nearly seven years and is already being reflected in distributor billing. Trade sources indicate that a pack of 10 cigarettes is becoming costlier by at least Rs22–25 in most categories, with premium variants seeing price jumps of up to Rs50–55 per pack.

Shift Away from GST Compensation Cess

The revised tax structure, approved by Parliament in December, replaces the GST compensation cess regime that has been in place since the introduction of GST in July 2017. Under the new system, cigarettes and other tobacco products will attract additional excise duty and cess over and above the highest 40% GST slab. This replaces the earlier model of 28% GST plus compensation cess, significantly increasing the overall tax burden on cigarettes.

Differential Impact by Length and Segment

The price impact varies depending on cigarette length and category. Distributors report that premium cigarettes of 76 mm length could become Rs50–55 more expensive per pack of 10 sticks. Mid-sized cigarettes in the 84 mm category are expected to see even steeper hikes, with some popular variants moving from around Rs170 per pack of 10 sticks to roughly ₹220–225. Shorter and economy segments are also seeing noticeable increases, though relatively lower in absolute terms.

Per-Stick Excise Duty Introduced

A major structural change is the amendment of the Central Excise Act to levy excise duty on a per-stick basis. Rates are linked to the length of the cigarette, moving away from purely value-based taxation. While manufacturers are yet to widely circulate updated maximum retail prices, distributors have begun billing retailers under the revised tax framework. Fresh stock with new MRPs is expected to enter wholesale markets shortly.

Important Facts for Exams

• Cigarette taxes have been increased for the first time in nearly seven years

• New excise duty and cess apply in addition to the 40% GST slab

• GST compensation cess regime for tobacco products is being replaced

• Cigarettes will now attract excise duty on a per-stick basis, linked to length

Concerns Over Illicit Trade and Smuggling

Distributors have flagged concerns that steep price increases could encourage illicit trade, including smuggling and counterfeit cigarettes. Industry bodies note that India has thousands of licensed stockists and retailers who may be adversely affected if consumers shift to unregulated supply chains. There are also reports that some companies temporarily held back stock ahead of rebilling under the new tax regime. While the higher taxes are expected to boost government revenues and align with public health objectives, enforcement and anti-smuggling measures will be critical to prevent revenue leakage and protect the formal distribution network.